This article is a follow up to the “Incremental Outsourcing” article that appears in the March/April 2016 issue of Facility Executive. Here the author discusses outsourcing as it relates to the governance process.
By Ingrid M. Fenn
Governance is all about accountability and responsibilities—and nowhere is that more important than in management of outsourcing, both within the company and facilities management (FM) organization and in dealings with outsourcing providers, from contractual terms and responsibilities to day-to-day operations.
When FM is outsourced, an effective governance process provides a formal structure for clear company/provider communication, from frequent operational meetings to annual strategic reviews. It engages both sides and defines their roles and responsibilities. And, it is an essential part of the contract to ensure parties stay connected on the right subjects at all levels of their organizations.
Outsourcing relationships certainly require FM organizations to employ strong processes, skills, and tools. However, in our work with clients at SIREAS, we have found the difference between success and failure in setting up and managing these complex relationships depends on a governance operating model based on principles and flexibility, rather than rules.
One of the most important principles of successful governance models revolves around collaboration at all levels across both organizations. It is so important that stakeholders are involved, both formally via steering committees and boards but also informally on a day-to-day operational level. Stakeholders here should be interpreted in the broadest sense possible, to include the entire FM organization, the company’s senior executives, the outsourcing provider, and the “users” of services (employees, customers, suppliers and others).
This wide ranging involvement results from an effective combination of information exchange and action. For example, a governance group can set up ad hoc advisory teams, actively pursue the opinions and participation of key business leaders, and offer informal educational presentations that stimulate the exchange of information. Superior governance requires regular interaction, a strong flow of information, and meaningful action to reach better solutions that more effectively meet both sides’ needs.
It also is important to balance stakeholder needs so that all parties feel invested. Companies that successfully outsource continuously “take the pulse” of all stakeholders to balance their needs over time. While it may be impossible to please all of them at the same time, the governance group can strive to balance the needs of each over the term of the agreement. Successful outsourcing relationships are dependent upon win-win solutions.
Another important governance principle for successful outsourcing relates to cultural synergies. Outsourcing FM successfully requires a strong relationship with a foundation of trust and collaboration. Finding common strengths among the culture of the provider and client inherently improves operational results. It is critical to keep an open mind and reach across organizational boundaries to understand the motivations of all stakeholders. Communication is an imprecise science, and misinterpretation increases when people attempt to bridge the language and experience gaps across functions and cultures. By taking special care to develop a deep understanding of stakeholders’ motivations and expectations, the organization can negotiate more creative and mutually beneficial solutions.
It is a common misstep for many organizations to assume the outsourcing relationship is one-sided. Alignment between the client company’s goals and the service provider’s actions has long been considered the Holy Grail of outsourcing. However, alignment remains elusive; client companies want to cut costs and increase service quality, while service providers want to increase revenue and decrease service delivery costs. While these objectives are not necessarily opposed, they tend to prevent effective alignment unless both parties actively seek out those areas where both sets of objectives can be met.
Client companies that expect the service provider to adopt and align with their objectives at the expense of their own will be disappointed, and continued disappointment leads to distrust, which will ultimately destroy the relationship. It is far more effective to seek true alignment around mutually beneficial outcomes than to gain false agreement to one-sided goals.
While outsourcing can be a very effective strategy for organizations with benefits that include cost reduction, operational control, reduced overhead, staffing flexibility, continuity and risk management, and the ability to focus on core activities; successful initiatives must have strong governance models that focus on stakeholder involvement, collaboration, trust, and alignment of vision and objectives for both the client and the supplier.
Fenn is President and CEO of SIREAS, LLC, an advisory firm located in Boston, MA providing corporate real estate and facilities management strategy and services designed to reduce costs, enhance performance, and increase shareholder value. Before cofounding SIREAS, she managed the real estate portfolio of health products firm Covidien as head of global real estate.